Description: It’s the world’s biggest crisis and challenge —bringing the other three billion into the global economy. How can we do it? What happens if we fail?
The following transcript has been lightly edited and condensed for ease of reading.
Speakers: Shumeet Banerji, Condorcet | Mike Froman, Mastercard
Moderator: Bhaskar Chakravorti, The Fletcher School at Tufts University
(Transcription by RA Fisher Ink)
Kirkpatrick: This is a very eminent panel we’ve got here. Bhaskar helped us put this together, it was his idea. He’s the dean of Global Business at the Fletcher School at Tufts and he’s going to take it away. I’m so pleased and honored at the quality of this panel.
Chakravorti: Great, thank you, David. And just yesterday when I was hanging out in the lobby, people were squinting and looking at my tag, they were asking, “So Fletcher School, that’s like a foreign policy school and what are you doing at Techonomy?” And I kind of said data moves across borders faster than Air Force One or intercontinental ballistic missiles. And because data moves so fast, often the coders at Facebook or Twitter or Google don’t have to cross borders, they sit in their beautiful offices and they code and their code goes all over the world. So there is a need for global affairs to be combined with technology in a conversation. Artificial intelligence needs to connect with contextual intelligence.
And I know that we are standing between you and cocktails so I thought I’d lead off with the perfect visual to get us going on a cocktail conversation. So with that, there you go. I’m a humble academic and you get an x-axis and a y-axis. So here’s my job, my job is much like a medieval mapmaker. The medieval mapmakers, they kind of charted a few parts of the world and wherever they couldn’t quite figure out whether it was a land mass or not, they scribbled, “Here, there be dragons.” And I feel we’re kind of at that stage where we are at the, “Here, there be dragons,” stage as we are mapping the digital planet.
And I do this in collaboration with a number of partners in the corporate sector and the philanthropic sector. We’ve done some amazing work, I think, in collaboration with Mastercard in mapping the digital planet and here’s what it looks like. So this is a picture that shows 60 countries around the world that account for about 85% of all the data that’s generated. The vertical axis measures where a country is in its journey from a physical past to a digital future. This is measured using an index called a digital evolution index. So as you go from to south to north the more digitally evolved you are. The horizontal direction is momentum, how quickly you’re moving. So you can see that the world actually splits up into four convenient areas and the bottom part of this map is what I call the Digital South.
And the Digital South is a part of the world that I’m hoping that in this session we shine a light on because it’s important. It’s big. It’s huge. It’s something that we have alluded to, we talked about it constantly over the course of the last several sessions but we’ve really not dived into it. It’s huge because if I were to put people on that map, you can see the bottom right corner of the map is where the digital evolution has not quite reached its full potential. Momentum is fast, momentum is high. The world’s population is lorded on the bottom right of that map. This entire graph would just tilt to the left and you can see that’s where all the action is, that’s where all the action is going to be. So it’s big, it’s important.
Second, it’s different from the digital knot. This is not the digital knot ten years late, this is a part of the world that is going to travel, go down its own path, follow its own journey. This is not simply Facebook being the medium that carries messages in different parts of the world and only now we’re beginning to realize some of the damage that Facebook might have done in countries like Myanmar. It’s not Facebook anymore that’s the major medium. It’s WhatsApp, which is very different. WhatsApp is the medium of choice in large parts of the digital saga. WhatsApp is encrypted from end to end, there are pernicious, there are poisonous messages that are being spread on WhatsApp and still here in Silicon Valley or in Washington D.C., we’re still having a conversation about Facebook. We’re still having a conversation about Facebook. So the Digital South needs to be recognized for what it is, it’s different.
And finally, it carries not just risks, it carries opportunities. This is a part of the world that is hungry for development, it’s hungry for growth. The costs of developing across this entire region, both in terms of sustainability and economic development, the costs could be anywhere between $3–5 trillion dollars a year. The commercial value associated with that development, if companies were to lean in and participate in the development is anywhere from $12–15 trillion dollars of commercial value. And in any given sector, for instance, the application of artificial intelligence in agriculture, as an example, we’ve calculated to be $250 billion dollars a year.
So there’s an enormous amount of potential here. So artificial intelligence needs to connect with contextual intelligence of the Digital South. And this session, I want to spend some time getting into that part of the world and I can’t think of two better people to help us navigate through this territory.
So to my immediate right, Mike Froman, who is vice chairman of Mastercard and chairman of the Mastercard Center for Inclusive Growth. And having gone there, just after having served on the cabinet of the Obama administration. So he knows both government and industry quite intimately.
Shumeet Banerji, who is on the board of directors of Jio, Reliance Jio. How many people in this room know of Jio? Okay, how many of you know the spelling of Jio? It’s J-I-O, which means lift. This is an upstart, a mobile data company that is a little over two years old, it has 200 million people already on it. By 2020, it will have 400 million people.
So let’s get the story from the ground-up form Shumeet on how this incredible network that can carry this opportunity in one territory and get a granular understanding of that. And then turn to Mike and learn about how a global company might look at that space and how it sees the opportunity for engaging in inclusive growth and commercial opportunity.
So Shumeet, tell us a little bit about Jio.
Banerji: So thank you, Bhaskar, so Reliance is a large company in India, it is primarily known as a hydrocarbons company. It’s India’s largest market cap company today. And some years ago, five, six years ago, the way that Mukesh Ambani, the chairman and managing director of the company tells the story, is his daughter came back from college in the States and said, “Dad, the internet at home really sucks.” When my son says that I don’t have a ready solution to it, in his case the way he tells the story, he decided to build Jio. Jio, if you look, we went commercial in September, two years ago. And just to give you some sense of the scale of it, the mission from the start was about, as you put it, connecting everyone, everything, everywhere at the highest quality and the most affordable price. How is that done? This is an all IP 4GLT network, it has no circuit switch fallback. Today there are over 200,000 radiating eNodeB base stations across the country. Over 250,000 kilometers of fiber for the backhaul. And today’s population coverage is 93% of India’s population. To put that in context, what this is really saying is that 93% of the continent is within reach of a high speed mobile broadband connection. If you look at any developing country, you don’t get numbers anywhere near that, you don’t get numbers near that here or in the UK.
So I’m deeply concerned about the Digital South, I’m concerned about the digital southeast of England, I’m concerned about the digital south of the United States. The reality is, news to politicians, you cannot be a digital superpower if your people are not connected. And, so the core idea of Jio is to bring an all-data idea to a continent. We have 252-million subs as declared in the last board meeting. We’re adding about 10-million a month, last quarter we added 42-million subs, gross adds. What is astonishing is that in these two years this has gone to being by far the world’s largest mobile data network. Jio carried 2.7 exabytes of data last month. That’s 2.5 times the size of the entire mobile data market in the U.S. So that’s 2.5 times larger, remember that there’s a huge fixed broadband infrastructure in this country that carries a lot of data. It’s five times China. Users are using right now 11-gig per month. Two and a half years ago, and there was 0.15-gig per user per month. So it is a radical transformation, I’m happy to get into a little bit more of the details if you’d like later, but it’s been one of the most astonishing things I’ve had the privilege of being involved in.
Chakravorti: Wow. So that is the largest mobile network company that most people in this room haven’t heard of, but now you do. So as you listen to this, Mike, and you’re part of this massive global organization, priceless, Mastercard. And Mastercard has committed $500 million, half a billion dollars for inclusive growth as part of its strategic objectives and vision. As you listen to just this one market and the opportunity that this market provides in terms of this incredible access that technology enables, how do you see your vision for inclusive growth playing out, not just in this market but worldwide?
Froman: Well, first, let me respond by putting it in context as you said. On one hand, we’re meeting at a time when there’s been incredibly impressive growth on all dimensions, raising people out of poverty, all the human development indexes over the last 70 years enjoyed unprecedented success. And yet, there’s been a reaction here in the United States and elsewhere around the world that the system isn’t necessarily working for everybody, we see a rise of populism and nationalism and nativism and protectionism. And that’s, I think, in some degree a sense that the growth has not been sufficiently inclusive. So we’re very much committed to inclusive growth and I think we have to take both of those terms on equal footing. We have to focus on growth which has been the big driver of all these improvements but make sure going forward it’s more inclusive than ever.
At a time when governments have been polarized and somewhat paralyzed from taking action, there’s a much greater burden, I think, and opportunity, on the private sector to step up and try and fill the void. And, so the story of Jio, I think, is a great story in that regard. What is it that companies are supposed to do in this context? I think there’s philanthropy, which in my view is helping, doing well, and helping other people do good. There’s doing well and doing good and we call that corporate social responsibility or ESG, how much energy you use, how you govern yourself, how you treat your employees. But the ultimate goal is to do well by doing good and show that you can have a positive social and economic impact while delivering commercially sustainable results, like Jio is doing here. It’s going to make a profit off of this, maybe not as much as Ambani would have made in some of his other investments, but he’s showing that it could be done on a commercially sustainable basis. That’s, I think, the very important step going forward.
What we’re doing in that regard, we’re focusing on inclusive growth, on economic development, and on the future of work. And on financial inclusion, which is a big part of it, it’s about bringing a half a billion individuals into the financial system, 40-million new micro-merchants into the financial system by linking them with networks that can help enhance their productivity. So whether that’s an individual’s case, by digitalizing the relationship between low-wage workers in labor-intensive industries like the garment sector or a certain farming sector. Or in the case of small micro-businesses, digitalizing the relationship between a micro-merchant, you know, the stall at the end of a road in Nairobi with Unilever, it’s supplier of goods, so that a bank could begin to extend credit, can begin to see a PNL for that business and begin to create a credit history for that business by bringing them into the financial system, creating the opportunity for those people, those strivers, those people most likely to grow their business and hire more people to have that opportunity.
Chakravorti: So if I could just pick up on that last set of points, if you think about just a country like India where there are more phones than toilets. And Bill Gates has just launched this initiative to try and close that gap. But the fact that now the number of phones and broadband enabled phones are just going to continue to grow, one of the initiatives that is central to the inclusive growth vision for Mastercard is data and the generation and use of data as a force multiplier, as a force for inclusion. Could you speak a little bit about how you see data as being an empowering tool?
Froman: Well, a couple of comments. One is I think you’ve talked about the South, the Digital South, I would focus a bit more on another kind of divide which is between the data haves and the data have-nots. You take the people in this room and the private sector generally and the incredible data resources and capabilities that the private sector has and, on the other hand, you take the public sector, governments, or the non-profit social sector who are falling further and further behind in terms of their ability to use their own data, to access additional data, and to have the same kind of impact that the private sector is having. Some of the panels earlier today were talking about how do you deal, for example, with city governments on transportation, making sure that your counterparts can actually take the data that you have and the tools that you have and have a positive impact? To me, that’s something that the private sector needs to be quite attune to, working with governments, working with the social sector to try and bridge that divide so that they also can take advantage of this data revolution.
But certainly we feel like, and we’re fortunate because the design of our—the way our business model works, it’s privacy by design. When you use your card we don’t know your name, we don’t know what it is you buy, we just know where money was spent and when and we can use that data to help give insights to governments or others about what kind of impact various economic development policies might have. Should you put a retail establishment in this neighborhood, should you extend a transportation line to this neighborhood, can you manage congestion better during rush hour traffic by using our spend data and our information? And using those kinds of capabilities to help solve major societal and economic issues, that’s part of what we see as doing in terms of what we call, “Doing well by doing good.”
Chakravorti: So now, you guys have got this incredible data network in place, what kinds of different services are being layered on top of that and what kinds of data are going to be generated by it?
Banerji: Well, let me connect this to the inclusion point which is that I think that where this investment becomes interesting is that the published aim of the company is to have high-speed, mobile broadband services accessible to 99% of the population. And you remember that this is a country with very high mountains and seas and oceans and islands so it’s not straightforward to get to that number. And the reason most carriers don’t do that is because beyond the 60% or the 70% of the population it just gets very, very expensive on that last mile problem. So that’s the kind of philanthropy aspect of this thing which is the commitment to bring India into a digital and data future.
Now, there’s a second barrier to getting into this game which is that the device all of you have in your pockets and so on is a $1,000 dollar device and there are cheaper versions of them but those are still $200 dollar devices and these are people living on $1 dollar a day. So there’ s a big set of innovations around device and there’s an image if you’re able to show it. So the big innovation here is this device known as a Geophone which I’ll show you in a minute, 500 million people in the country use an old-fashioned Nokia style feature phone and what the Geophone does is make that available to all of those users. It’s a full 4G LTE device, it operates on an opensource but proprietary 2 GEO operating system and gives you access to the internet. And so we have in rural India a very interesting inversion which is most people would expect, if you conventionally think about a business that you have an 80/20 rule, that the top 10 metros or the top 20 cities in the country account for 80% of the data. Not true. The top 10 urban areas of India account for only 22% of the data traffic on the geo network.
So rural users are actually using, if you index it up and account for the fact that these devices which we aren’t being able to get up, anyway, it looks like a feature phone and these devices give people access and we asked someone recently whether this was their first phone and she said, “It’s my first camera, my first radio, and my first television, and my first bank account.” And that is the power of unleashing digital inclusion in places where there has been nothing. So these are people who have been completely dark, they have not been anywhere near anything and access. And so it’s really exciting and there are two or three areas of the sort, I think that in rural India penetration is rising extremely fast, the device is an astonishing success.
And what people are doing with it is kind of interesting which is it certainly the biggest digital experiment I could ever have been involved in. And you wonder what do people do with this? So the one on the left is our first one, Geophone 1, that one you get for free and the way it works is that you pay a deposit of 1,500 rupees which is about $20 dollars and in three years time if you return the phone in whatever condition you get the money back, no questions asked. We dropped that to 500 rupees last quarter because even at 1,500 there were barriers to uptake. The one on the right, as you can see, looks a bit like a BlackBerry but has a full QWERTY keyboard and gives you, again, access to—by the way, this also comes with search, browser, so on and so forth, WhatsApp, super important, more important than Facebook in that market.
So I think what we’ve learned is that people watch a hell of a lot of video and you might think, “Well, what kind of video?” Well, it’s kind of interesting. There’s a huge amount of traffic looking at educational videos, like, people teaching themselves stuff on the internet.
Froman: So it’s not just porn.
Banerji: Oh, well, maybe it is. I’m sure there’s some of that just as anywhere else on the human race. But there is an enormous amount of curiosity and in a country without—and I’m happy to talk about health care and education if you’d like to, but it is astonishing how fast it is moving. You know, it’s interesting that the average user is using 11 gig a month, rural users are using 8-gig a month on a device, as you can see, with a much smaller screen, much lower resolution, therefore, much lower bit rate than your fancy Smartphones.
Chakravorti: So you mentioned WhatsApp and I’d like to sort of come back to the notion of, “Here, there be dragons.” So you have this woman that you mentioned for whom this was the first phone, television, book, and everything else, so you go from basically no exposure to this Swiss army knife of communications and potentially banking in your hands. WhatsApp carries rumors that are quite often unverifiable and it is leading to some pernicious behaviors. Using the phone for financial services there is a concern about data, data protection, privacy protections, how do you deal with these kinds of issues in a society that has suddenly got this technology almost overnight. And it’s not just technology from the south of London, this is technology far more powerful than the access that we have in South London. So I guess a question for each one of you.
Froman: Do you want to do the pernicious and I’ll take the virtuous?
Banerji: Look, I think that there’s been more than ample discussion at this conference about all of the kind of downsides and what’s happening with that and that comes with the territory in my view. But I absolutely believe that this technology is transformative for India and that if you look at simply—let’s take the banking question, you have a variety of welfare schemes for poorer people which today are paid out to them essentially in cash because there’s 600,000 villages, there’s a bank near perhaps 100,000. So to have a bank account is difficult so it’s a cash transaction and as you might imagine—there are two ways to make money and one of them is to rip off $1 dollar from every poor person in the country. It makes you a billion, that’s not bad, right? Now, if you can just—the finance minister can hit the red button on the 31st of the month and your account automatically credits for 1,200 rupees for your whatever it is, minimum income guarantee, all that’s gone if I could transact with it. So I think, yes, there are downsides to these things, I also think that it is important to not overdue the metropolitan condescension of poor, uneducated people. They understand technology very quickly, they understand what’s—I think that the level of sophistication and understanding what is true, false, and what is used, by the way, in a pernicious way by people who wish to, it’s quite well understood.
Froman: I think just to build on that, I think there’s a great opportunity to really focus on the digitalization of the base of the pyramid. You know, you’ve done great work on the cost of cash but being able to bring people into the financial system, whether it’s as farmers, as micro-merchants, as a mother getting her children vaccinated, as a parent paying for education fees, or as somebody getting, a refugee getting a disbursement from an aid organization, or a subsidy from the government. Having a digital identity, a common data layer that the various organizations that engage with them can see and analyze creates a real opportunity for people to begin to build their digital life in a way that is much more safe and secure. There’s a lot of apocryphal stories about you move people from cash to electronic payrolls and suddenly they think they got a 25% raise just because that was the amount that was being skimmed off by all the people along the way, that’s the kind of benefit that we’re beginning to see. And it’s access which is the first step toward financial security and financial health. Financial access is only one step but it’s the first important step and then you begin to build a future, as you say, that—they’re incredibly sophisticated when it comes to managing their money, they know exactly what they’re doing, making sure that they have the opportunity to achieve financial health and security as well.
Chakravorti: Well, on that note, we’re just about to hit the time for cocktail hour. And “Here, there be dragons,” dragons are scary things if you’re looking at it from this direction but looking at it from the East, dragons are actually good animals that bring good things. So let’s celebrate dragons and thank you for surviving this marathon of a day.